Please standby, we are about to begin. Good everyone. And welcome to the Essex Property Trust Third Quarter 2015 Earnings Conference Call. As a reminder, today’s conference is being recorded. Statements made on this conference call regarding expected operating results and other future events are forward-looking statements that involve risks and uncertainties. Forward-looking statements are made based on current expectations, assumptions and beliefs, as well as information available to the company at this time. A number of factors could cause actual results to differ materially from those anticipated. Further information about these risks can be found in the company's filings with the SEC. When we get to question-and-answer portion, management ask that you be respectful of everyone's time and limit yourself to one question and one follow-up question. It is now my pleasure to introduce your host, Mr. Michael Schall, President and Chief Executive Officer for Essex Property Trust. Thank you. Mr. Schall, you may begin.

Thank you, April. Thank you for joining us today. And welcome to our third quarter earnings conference call. John Burkart and Angela Kleiman will follow me with comments. John Eudy and Erik Alexander are here in attendance for Q&A. This part quarter John Burkart assumed leadership of our Asset Management and Operations functions, and thus he will provide commentary for those activities today and in the future. Also as you know, Angela became CFO on October 1st upon Mike Dance’s retirement. Please join me in welcoming both of them to their new roles on the quarterly call. I will cover the following topics on the call. First, Q3 result and activities, second, an update on rent control discussions, third, review of investment market, and fourth, comments on our 2016 preliminary market forecast. On to the first topic, yesterday we were pleased to report another impressive quarter driven by strong West Coast economy. As expected, demand from robust job growth led the continued high occupancy for apartments and significant increases in for-sale home price. Thus our reported results for same property revenue, NOI and core FFO per share growth exceeded our expectation and led the multifamily industry. As to the quarterly results, I would like to recognize the Essex team for their tremendous effort and for exceeding expectations once again. With the few exceptions, rents at the B quality property and locations are growing faster than As, exemplified in the Oakland Metro with 12.7% same-property revenue growth, the highest in our portfolio. Despite the fact that Oakland -- the Oakland Metro generated only 2.2% year-over-year job growth for the nine months ended September that significantly lag San Francisco and San Jose at 4.6% and 5.5%, respectively. These occur because affordability and commute time are two critical considerations for most apartment figures.…

Thank you, Mike. I really appreciate the hard work the operations and asset management team this last quarter executing our plan which enables our great results. Third was robust. We continue to have a positive outlook for all our markets, higher than expected job growth continues to be the primary catalyst for increasing rent and higher occupancies throughout the portfolio. Strong demand pushed economic rents higher leading to our fourth consecutive quarter of 10% increases in same-store property NOI growth. Gains from renewal activity increased 6.6% portfolio wide in the quarter and a turnover was down across the portfolio from 63% in 2014 to 60% this quarter. As of yesterday, the same property portfolio in all regions had occupancy at or above 96% with a 30-day availability of just over 4.7%. All of our markets are benefiting from the combination of strong job and income growth and insufficient supply to keep up with the demand. According to Axiometrics, market rent growth was stronger in September 2015 year-over-year than last year at this time in each of our region, Seattle, Bay Area, Southern California. So while we are not giving guidance for next year, we conclude from this that our markets are strong or stronger than last year at this time, which bodes well for next year. Ramping up our redevelopment pipeline has been a major focus for 2015, including the restart of the program for the legacy BRE property. Our renovations team completed over 1,000 apartment home renovations during the third quarter and an increase of 50% compared to the third quarter of 2014. A little over 30% of the unit renovations are currently focused on the legacy BRE portfolio, which negatively impacted occupancy during the quarter. We continue to make progress on our merger integration phase II and phase…

Thank you, John. Today I’ll discuss our third quarter results, the revised outlook for the year and provide an update on our balance sheet. For the third quarter, we exceeded in this point of our core FFO guidance by $0.06 per share. $0.03 of the outperformance resulted from higher revenue, primarily driven by the strong job growth in our markets which accelerated the rate of lease-up absorption at higher than projected rents. $0.02 of the outperformance resulted from lower expenses within our consolidated properties, although part of the favorable expense variance is timing related. Therefore we expect our year-over-year same property operating expense growth to be between 3% to 4% with the combined portfolio in the fourth quarter. Following two previous revenue guidance increases totaling 115 basis points at the midpoint, we are reaffirming our same-store revenue growth forecast and are pleased to report that we are currently tracking slightly above the midpoint of that range. Now turning to the balance sheet. Our balance sheet remains strong. Our net debt-to-EBITDA has now declined to 6.1 times, which is one quarter ahead of our target due to stronger than anticipated growth in EBITDA. Based on our market rent growth outlook, we expect this metric to decline to the high five’s in 2016. In addition, we are currently evaluating our options to refinance $114 million of Fannie Mae credit-enhanced bonds in the fourth quarter. In doing so, we anticipate potential fading of $1.4 million annually over the 7-year term. And we would incur approximately $6 million in write-off, of which $4.25 million is non-cash. These costs will be excluded from core FFO but included in total FFO and are shown as non-core adjustment on S14 in the supplemental. As for our plans for the $350 million debt maturity in 2016, we have good flexibility with access to multiple options. For example, our $1 billion revolver has virtually no outstanding and if we leave this debt floating, our variable-rate debt exposure will only increase to approximately 10% on a low average balance sheet. Although this is not a preference, if we were making this decision today, we favor refinancing most of the maturity, returning debt with a five to seven-year term loan and/or a 10-year unsecured public bond execution, depending on the interest rate curve and the related risk. Lastly, we have classified one property as held for sale, our corporate headquarters in Palo Alto, which we expect to sell in the fourth quarter. We will be moving to a newly leased space in San Mateo. We’re presenting the final steps in the office relocation plans which will consolidate the BRE corporate office in San Francisco with the Essex corporate office in Palo Alto. I will now turn the call back to the operator for questions.

Are you there April?

[Operator Instructions] Nick Joseph of Citi.

Thanks. One of you can frame the 7% loss in the lease in a historical context. You mentioned last year it was 5% but is this the largest loss to lease that you have seen at the end of September?

Nick, hi. It’s Mike Schall. I don’t have that statistic going back each year historically for a long time. But I know that as of July that typically is the high point of loss to lease as you go through the year and the low point is in December. So July ‘14 was 8%, July ‘15 was 8%. The low point was December. So December ‘13 was around 4% -- I’m sorry December 14 was about 4% and 13 was up 4%. So gives you some idea. Those are obviously during a very strong periods of time. I’ve seen loss to lease at zero at the end of December and at 5% to 6%, I would guess is the probably the more normal high for loss to lease in a typical year. Again, these are, from my view extraordinary years. And that metric, I think at 8% in July is near the most -- near the strongest that we’ve seen historically in my almost 30-year career.

Thanks. And just staying with that. The 6% economic rent growth outlook for next year is actually higher than the 5.6% you had predicted at the same time last year. So what gives you the confidence to make that prediction today?

Well, a couple things. If you go back to our original guidance that you noted for 2015, it was based on 2.5% percent job growth. And if we are tracking, if used in September, year-to-date numbers are at 3.3%. So, we pretty dramatically outperformed that number and so we are carrying momentum into this next year. And our view is you add limited amount of supply and supply-demand relationship is moving in your favor, you will build pricing power. So there is a little bit of an incremental pricing power just from the supply-demand situation and consequent impacts on market occupancy levels then the place where people want to live most.

Thanks.

Next, we will hear from Jordan Sadler of KeyBanc.

Hi guys. It’s Austin Wurschmidt here with Jordan. You commented that conditions are strong as they were last year. Is it conceivable to think that you would be able to push rents at a pace that was higher than what you achieved this year?

Again, this is Mike Schall. I would just go back to the job question and if we exceed the 2.5% job growth that is the basis for our 6% market rent growth and I would say, yes, again, we will exceed it once again. We are concerned about affordability. We are concerned about all the issues with the global economy that were noted before, although one compelling factor is the personal income growth that we are seeing, especially in the tech markets, which is in the 5% to 6% range. So if you're getting 5% to 6% personal income growth and rent sort of let’s say growing at 8% or 9%, it doesn't have that bigger impact on affordability. And again, not everyone is going to get the big increase in income. The personal income growth is driven largely by people, the new tech worker coming in, making a lot of money and displacing someone that is not getting a big increase in their compensation who has been forced to move to a place that’s further away from their deployment center. So this transition is ongoing through the rental pool. But if we bring in high income tech workers in greater numbers than we have projected on F-16 then yes, we would expect rent growth to be higher.

Thanks for the detail there. And then you mentioned in your prepared remarks also about a decline in housing supply in 2016. And I was wondering if you could expand on that a bit and give a little bit of detail by market.

I don't think that we actually have much of a decline in supply. So, I'm not sure exactly what you're referring to. I think it’s very nominal. Who has those numbers? Let’s see ‘15 versus ‘16. I think the supply decrease is somewhere around like 0.1%, so overall. So, we are not expecting supply to decrease. Again, we don’t have complete certainty. We have some factors that would lead us to believe that supply could decrease, i.e. construction costs going up at 10% in each of the last two years. And John Eudy is here and he is looking for development deals every day and he's having trouble with the underwriting because costs have moved so quickly and pro forma, it sometimes don't reflect the most current cost structure. So, when John and I talk about new deals, we are finding it more difficult for us to underwrite it. And if we are having trouble underwriting them, I can pretty much assure you, others are having trouble as well. John, do I have that right?

Yes. Any interactions that we are seeing, cities are getting tougher and tougher. Nothing is going in the favor of oversupplying market.

Thanks. And then just on your comments there about the aggressive bidding going on for new deals. You mentioned being a net seller next year by a little bit amount about. Are there any markets that you are looking to lighting up and how should we think about the assets that you're taking to sellers, are this more BRE assets or they legacy assets?

I don't know -- just to be clear, I don’t think that we will be a net seller next year. But I don’t have complete clarity on that. I think what I said was that we will likely sell more next year than we sold this year. And so to be clear, the way we look at this is there are other two sides of this coin. One is what’s going on, on the capital slide. In other words, what’s the relationship between where REIT stocks are valued and the private real estate markets? Is there a disparity there between the two? And if REIT stocks should trade at valuation above where private real estate markets or then we want to be buying real estate? And the flip, we want to be selling real estate and our view is that we are currently somewhere around parity, which means we call the portfolios. So that’s that the capital slide. On the real estate side, we have very few assets that we put into the two bottom categories. Those two categories we are most motivated to sell, which are substandard operating properties and marginal properties that’s trading like good properties for whatever reason that people are forced to take substandard properties. But we don't believe when the economy changes that they will be the beneficiaries. So those are the calling assets and then the other categories of properties that we would be more interested in selling, again if this relationship between REIT stock values and private real estate values is appropriate, would be the properties that have some other maybe some minor physical or operational impairments and/or the properties that we consider to be market performers. About half our portfolio, just by way of background, we consider to be within the irreplaceable category, which we are unlikely to sell almost at any price. So, we have a ranking process that ranks the properties in terms of our desirability of sale, again within the constraints of how we look at the capital side and that’s how we run our disposition function.

Great. Thank you for the clarification and the details.

Next, we will hear from Dan Oppenheim of Zelman & Associates.

Thanks very much. Was wondering -- relates to the dispositions, would you have more of an emphasis on the pre-1995 entities where they would be subject to rent controls if they are to be passed as per my knowledge?

Hi, Dan. It's Mike Schall again. It comes up as a consideration. But I don't think it's one of the key considerations primarily because of California State Law. Again in California, State Law, vacancy -- there is vacancy decontrols mandated. So even though you may have rent control upon move out your -- moving people’s market at that point of time, we operate in several rent control cities including San Francisco, Los Angeles, Tennessee. So, I don't think that that would necessarily change things. Our experience in San Francisco, for example in our rent-controlled buildings in San Francisco is that fewer people move outs, so your turnover rates are lower, which means you can’t capture the loss to lease as quickly and you think that might be a real problem. But the flip of that is there are people that otherwise would have moved out of that building, if not for the subsidy and bought a home or move somewhere else and those people now are occupying a unit, which effectively makes the availability of units that are vacating smaller and giving us more pricing power on the other side. So again, rent-controlled cities are not necessarily horrible for us as long as state law remains in place.

Got it. Okay. Thanks. And then I guess other question, wondering about the magnitude of the rent increases and the turnover which clearly was down year-over-year. But just wondering in some of the areas Santa Clara, San Jose where you’ve seen the high levels of rent growth, are you also seeing more move-outs on account of those rent increases? Or is actually lower because of the strong income growth in those markets so that it’s initially a function of the rent growth, but it’s more of the income growth that’s driving into that if those rent increase aren’t an issue.

This is Erik. I would say no, that we haven’t seen an increase due to or significant increase due to financial reasons. If you look back over the last couple of years, that number is bounced around between 15% and 18%, that people are citing financial reasons. And so that’s where it’s today as well. The one caveat is that there has been some uptick in people citing relocation out of their area as the reason. And we believe that some of that is probably related to financial reasons, but again that hasn’t moved enough for me to believe that it’s significant.

Thanks so much.

Thank you.

Alexander Goldfarb of Sandler O'Neill.

Good afternoon, or I guess good morning out there. And Angela welcome to the hot seat. Just quickly a few questions here. The first one, Mike, is you said that you’re considering increasing dispositions for next year. If we look going back, you guys have harvested some of your funds over time, unloading of meaningful parts of the portfolio. There is also a focus I think of Essex to always grow FFO. So would you guys ever contemplate a transaction where if you thought that the pricing so dramatic that you think that to do a sale of property that would result in earnings coming down, because you saw the significant part, even though you may generate huge gains for shareholders. Or the view is to always prune in smaller amounts and leave the larger portfolio stuff to joint ventures.

Yes, Alex, good question. No, I think if there is a compelling opportunity to sell assets and distribute through a special dividend, I think we would absolutely do that. Again, right now, we are in this I just described in the sort of the parity base on the capital side where the stock obviously bounced in all over the place, so maybe getting out parity. But we’re at that point where there is no compelling arbitrage between the REIT stock price and the private real estate values. And so our motivation in that environment is not -- is great as it would be if I would say share prices and private real estate values diverging in as they have over the last several years. So there is some concern about, whether people will remember, whether ambassadors will remember that we paid a special dividend and that will probably get factored into our track record, but that’s a relatively minor concern. And since that is the only reality with respect to selling assets with large gain and distributing money, we obviously can use a 1031 exchange. But if that’s a reality and that’s a right thing to do, then we are going to do it.

Okay. And then switching to Oakland, last cycle you guys did some investments over there, there is a high-rise tower that you guys got involved in. And then if memory serves I thought you guys sort of exited the market or weren’t as be pleased with the results that you’ve got. But at the beginning of the call you guys spoke highly if the market as far as just the accessibility to San Francisco in the low cost option. So is this a market that we should see guys increasing invested, or is it still, even though maybe attractive right now, you maybe hesitated to put longer-term REITs there?

Yeah, I think there is maybe a little definitional issue here. The City of Oakland is different from the Oakland Metro. The Oakland Metro includes Fremont and Pleasanton and Walnut Creek, etcetera. And so we’re seeing that the Oakland Metro, which is -- what generates the 12.7% same-store revenue growth is the broader metro and there are places within that metro that are very high quality and are accessible to San Francisco and some of the major job hubs. The one thing the Bay Area really got right was the Bay Area Rapid Transit District, which essentially has train to go from a variety of locations into San Francisco and many, many people, including myself, are living in Fremont, which is in the Oakland MSA and getting to San Francisco is a heck of a lot easier than driving. So it’s the one thing they got -- I think that they got very right. And so there are locations within the Oakland Metro area that we think are high quality durable in the San Francisco etcetera. We also believe, as John said, that as cost on the office side increase that some employers will start looking at different options that will benefit some of the other metros, including Downtown Oakland in this case, but I wouldn’t limit it to just Downtown Oakland. There could be some businesses or some parts of businesses that will move up and down the coast and/or potentially other markets as well as the cost of business increases.

So as Downtown Oakland is not something you may revisit or right now it’s not on the radar?

To be clear about just Downtown Oakland, we have a high-rise building that we built down the street from the one you’re referring to. And I don’t think that we’re looking at anything else than Downtown Oakland. It has to be so specific because there are some areas in Downtown Oakland that we really, really don’t like. And so we would avoid them, but we would be highly, highly selective in Oakland, maybe less on so some of the other locations within the Oakland Metro, the broader metro.

Okay. Thanks, Mike.

Thanks.

Next, we will hear from Tom Lesnick of Capital One Securities.

Hey, guys. Just quickly on the same-store guidance range, obviously on the 443,000 units, the ranges were unchanged, but on the 28,000 units OpEx was revised lower kind of implying that on the DRE portfolio, there was a revision higher and hence the range was unchanged. I was just wondering what was driving that.

No, it’s not because of that. We revised the Essex same-store because we have realized the savings from the first quarter. And so we have not revised it for the combined portfolio, because we are still waiting primarily the taxes, the biggest component of expenses. We’ve only received 75% of the taxes from the DRE acquisition. And so although that has come in slightly favorable, there is still a quarter of a less, so we are just waiting on that first before we make any decisions.

Makes sense. That’s helpful. And then on the insurance reimbursement accounting, so there was about $3.1 million on the income statement and then call it 1.8 was backed out for FFO and then another cost, 600 was backed out for core and fine that there was a piece in there that was considered core. Could you clarify what that was?

Yes, happy to. And we did move the geography a little bit this quarter and so, but the net, net is all non-core. And we added a line in our -- I think it’s in the one of supplemental, S-2 that showed insurance reimbursement and so, and there were because of that we did a prior period adjustment. So it looks like some got ended in four, but it’s not in Q1. We can now talk after the call and I can walk you through the math.

Sure. Happy to follow up on that. And then quickly, what was the recurring CapEx number for the quarter?

The recurring CapEx is about $18 million for this quarter and you will see that in our Q3 that’s coming on next week.

All right. Great. Thank you very much.

Next question from Greg Van Winkle, Morgan Stanley.

Hey, guys. Going back to your market forecast from the last page of your supplement. You talked about how job growth versus supply growth still really get all your markets, which is waiting to the strong rent growth forecast between '16. If you had to think about the risk though and where you might be wrong, where you the least certain about your projections, are there any of those markets that forecast where you think the more risk and others, whether it would be the upside or the downside?

Hi. This is Mike. That’s a good question. We think about risk in really two different ways. One is the risk that in a major economic blip. It seems like all the job growth across the nation goes to zero and so the market with the highest overhang of new construction as a percentage of stock is the greatest hit. So, Seattle from that perspective at 1.3% has the most overhang with respect to deliveries, potentially in an environment of, again, if demand or job growth goes to zero across the nation. It would have the greatest impact. In terms of the supply side of the equation, we expect to do enough diligence to have very high degree of confidence that the supply numbers in this document are accurate. The one piece is you can throw up or build single-family homes relatively quickly if you could entitle them, whereas the apartments and condos it takes a very long lead-time and it takes couple years to build those building, so we should be able to get them 100% right. So we feel very confident as it relates to the supply estimates, which leads us with, of course, the job forecast. And on this, obviously, no one has the right answer. None of us have a crystal ball. We try to take a middle of the road type of approach and maybe with an element of conservatism. And again, last year if you look at how we approach the same document, we were pretty conservative. This year we’re not estimated that. We’re going to continue with this incredible job growth that we’ve had in 2015. We’ve moderated it somewhat. But the reality is we don't know. We think this is our expected case scenario, so therefore we expect the West Coast coastal metros to outperform the nation, the nation at 2% by -- what is that around 20%, 25% and I think that’s a rational relationship over a longer period of time. So we put this as a -- maybe it tends to be a little bit conservative and we hope to outperform it, but we view this essentially a balanced forecast. And I think the risks are really the economy and what happens with the economy. That’s going to drive whether we hit these job growth forecast and whether the nation hit its job growth forecast and then you would rank this and say, Seattle would be your greatest exposure if you end up with the major economic issue.

Okay. And absent any nationwide economic slowdown, there are any of the three major geographies for you that are more or less risk in the job growth side, just from kind of market specific issues?

Well, you say, I mean, Southern California is a more diverse economy, so you would say, the chances are that if you’re going to have widespread dislocation in Southern California, it has to come from a variety of factors. Obviously, we have more tech focus in Northern California and Seattle. So you would say, if something happens to the technology, we have somewhat greater exposure there just as relates to the components that drive the economy. So I would say, same is true, I mean, all of this divergence within the economy, where certain sectors are doing really well and others are doing poorly, look at what happened with energy, for example. So anything that has a greater concentration of any part of the economy, I guess, potentially is more exposed.

Yeah. Sure. That makes double sense. And then last one here is, if we think about upside from, I mean, redevelopment and also optimizing lease expiration in the BRE portfolio, how much of the tailwind you think that could be the same-store revenue growth in ’16?

This is John. The -- on the theory on the renovation side will probably add about 50 basis points to the growth rate towards the second half of ’16. It still take a little while to ramp up and that’s the impact hit the bottomline. As it relates to city in the expiration in better order and the amenity in [indiscernible] better order, that’s an ongoing process that that took us several years for our revenue management team that was very hard to make adjustments in the systems for the Essex assets. We see that continued on for the next couple of years. I can’t quite quantify the impact other than to say that as we mentioned earlier, we had some issues earlier on this year because of the expiration. And it’s not as simple that you just solving it at that point in time. The most people in the marketplace want a 10 to 12 month lease and so by trying to force a new expiration schedule, you don’t get -- surely get the best results so you solve that types of problem. We’ve couple of rental renovation and it will take few years.

All right. That’s great. Thanks, guys.

Next we’ll hear from Drew Babin of Robert W. Baird.

Hi. Great quarter. Looking into next year, I mean the BRE portfolio integration, it terms your expense line items. Any visibility at this point on which line items we may see kind of shift one direction or the other, as different cost savings initiatives take deeper effect. And also kind of what G&A run rate expectation is the same factors?

Yeah. This is John again. I’ll be careful not to get into forward guidance but just to give some flavor. Right now Erik and his team, they’ve worked very hard [indiscernible] over the portfolio and we ultimately have our expenses and BRE expenses on it due to per unit basis pretty close. So from the go forward basis, we don’t expect large changes that relate to one portfolio and the other. We are working as I’ve mentioned on our Phase III of the merger integration which includes procurement. And we do expect to see some savings there. We don’t have our hands around all of that this point in time. We also have better set of resource management as we mentioned previously and that is really largely focused on the BRE portfolio. We expected something else that to save as much as a $100 a unit in utilities as we implement that. That’s pretty tedious. It takes several years to implement each of the programs and to do it well. So that will work its way into the BRE portfolio over say a three year period some of which we’ve already completed.

And any impacts noticeably on the G&A front with the office consolidation?

We are in the process of rolling up our 2015 budget. And so on the office front -- that’s play this way, I think G&A as a whole, probably would expect in modest increase but its not going to be materially different from what we’re seeing right now.

I think there will be a little bit of geography difference because we’ll take the proceeds from the sale of the office building and reinvest them and that will offset some of the G&A that were coming from the office relocation. So we expected the net core FFO impact to be modest but the geography will be a little different.

Okay. That’s helpful. Thank you.

Wes Golladay of RBC Capital Markets.

Wes?

Wes, if you can release your mute function, we are unable to hear you.

Hey, sorry about that. Good quarter everyone. Here we go. Real quick on the job forecast, how did you derive that? Was that a third party or you looking at that individual office leasing day that you’re seeing and coming up with your own forecast? How granular does it get?

This is Mike. Wes, we use a variety of data vendors, economy.com, Rosen, and variety of others. And so we try to build a consensus as to the U.S. job growth. And from there, we look at historical relationships that the U.S. is doing this, what is the likely impact on the West Coast on our metros? And we’ve given consideration to specific sector. So it isn’t granular in the sense of we've got an estimate for what’s happening at HP but it starts with the broader macro expectations for the U.S. and then it looks true to the sectors and tries to predict what is going to happen. And then of course, we take that information and we create a supply demand model for each of our metros, our 25 submarket and then we rank them from the perspective of what we expect rents to do over the next four years and that’s how we make our capital allocation decision.

Okay. And then you mentioned more about rent control this quarter as well. Quick question for you on that. How much of your tenant base is that customer that you don’t want to displace the teacher, the police officer versus the tech port of course, which is growing their income faster than you’re growing the rent?

This is going to be completely anecdotal, but I think it is significant part of our rental base. So I am guessing in Northern California, Seattle, it’s somewhere in the 40% range, 30% to 40% range. And again, those people -- this is an ongoing process, essentially people come in and make in a lot of money, able to rent that expensive unit and displace into someone that doesn't get a huge increase in compensation and they move to next wrong out let say. So it’s hard to tell. I mean, we’ve seen this play out many times in the Bay Area. It's not nearly to the extent that I saw in 1999 and 2000, this one on maybe three or four more years, and therefore that transition area effect continues to happen. But it is not limited by any means to California or San Francisco, it goes on a New York City for example. So this is the ordinary operation of the rental pool and incentiving the people that make the most money and therefore get the choice of where they want to live. So my view it is entirely again normal part of the marketplace, although I do believe that California would benefit itself and the employers and the whole economy would find a way to increase more housing.

Okay. Thanks a lot.

Next, we will hear from Nick Yulico of UBS.

Thanks. Mike being that it’s in Palo Alto, the hard of venture capital land. I was wondering what you’re sort of hearing from people on that and about, there has been some data showing venture capital funding, number of deals has been coming down, fewers are start ups. How is that -- are you looking it as leading indicator for the economy out there and kind of what is your take on this discussion?

Yeah, it’s a good question. And we are somewhat concerned about venture capital and we do track it. We’re less concerned about the valuations and whether there's an exit into the public market and liquidity as it relates to those entities. We are more concerned about how many people do they have, how many employees do they have, how many people need housing. And in that light, I can’t express how different the current environment is from the internet boom in the late '90s. If you take the top 20 unicorns for example, I believe that they employed somewhere around 26,000 people. If you take five public companies Oracle, Apple, Cisco, Google, Facebook they employ 367,000 people. We are obviously much more concerned about the big tech companies and what they are doing. And it's amazing, we’re looking at what for example Google is doing with the Alphabet company and all the different technology related spin-offs and combined with the fact that they have an enormous amount of capital to deploy into those entities. It gives us some comfort that the tech hiring is not going to follow fall off quicker. And that is why we feel pretty comfortable with our expectations on F'16 and our market outlook, because it seems like there's a lot of activity out here and there is a lot of money out here that pursuing that activity both we see and some of the major corporate entities.

All right. Good points. I guess turning down to Hollywood, the Nickelodeon site you guys have, can you just remind us what sort of ultimate cost on that project and little bit more about where you think maybe land value is to equity, there has been a lot of site change around there recently and on the market right now for sale. And then just lastly, I want to be clear, I don’t -- whether or not that site is actually listed in your land held for development or if it’s still some other piece of real estate because at one point there was lease on it?

This is John Eudy. In general, you are aware of the specific location in Hollywood. It is a ground zero for Hollywood locations. It has been in a number of other transactions in the Hollywood address area that are completely different. As far as it being, let’s take it as future, it still has an investment I believe. Is that correct Angela? The Hollywood asset is an investment because we kind of lease with the Nickelodeon.

Yeah.

In terms of our basis where we believe, well below what we would be able to trade it for today if we choose to go in that direction and we are under the radar in terms of the height of the building that we are going after and less visibility in terms of pushback on the entitlement side. So, long and short is we expect sometime late next year is when we would transfer it over from a leased investment to an active land development transaction.

Okay. I guess, I mean that’s helpful. But anything what you can tell us on just sort of the ultimate, how to think about SAR and because there are -- I know, we can look at land comps in the market but some idea but how much you could actually build on that site?

Approximately, 200 units is what we are going forward and it fits within the SAR fairly nicely. Until we get it all done, we don't like to do a lot of projecting assumptions until we are ready to announce so.

Okay. Got it. Thanks, guys.

Thank you.

Our final question today comes from Conor Wagner of Green Street Advisors.

How meaningful is factor, the low market tax is due to Proctor’s keen in ranking your potential dispositions for next year?

Hi, Conor. It’s Mike Schall. It is a factor. Procter team gives us a fair amount of wind to our back relative to what buyers will have to pay if they purchase an asset. And so, I say number one is the factor. Number two, we are looking for a variety of different transactional approaches to avoid a proper team reassessment. So it could involve selling less than half 49% of portfolio of assets for example to an institutional investor. So there are some ways to manage that we believe but the management of Procter team is a factor for sure.

And then on the dispositions for next year, is there any thought to condo yet or is it still too early?

I think it is still a bit too early. Again, we can only pull that trigger one time. And so we targeted a 30% to 40% premium to apartment values in order to make it worthwhile to convert from an apartment to a condo. And we are not seeing that 30% to 40% premium anywhere. Although in San Francisco and actually a couple of the other Bay Area cities, we are starting to see 10% to 15% premiums of condo values over apartments. So, we are starting to see that divergence, taken longer, not necessarily that those condos have done poorly but because apartments have done so well. So the work we continue to monitor it.

Okay. Thank you very much.

Thanks, Conor.

And there are no further questions at this time.

Okay. Thank you. Well, in closing, I want to thank you once again for joining the call. We wish you and your family the safe and enjoyable Halloween and look forward to seeing many of you at the NAREIT Conference in a few weeks. Good day.

That does conclude today’s conference. Thank you all for your participation.